Draghi, who sparked a global market rally last week by pledging to do whatever it takes to preserve the euro, is trying to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before ECB policy makers convene on Aug. 2. He meets with U.S. Treasury Secretary Timothy Geithner in Frankfurt today and is also attempting to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases.

Leaders in Berlin, Paris and Rome have already endorsed Draghi’s approach, echoing his language in saying they will do what’s needed to protect the 17-nation euro. Draghi must now deliver or face a renewed selloff on bond markets, where soaring Spanish and Italian yields have fueled speculation that the monetary union could fall apart.

Draghi “put his personal credibility on the line” and “would not have done so without being confident about his key constituency,” Erik Nielsen, global chief economist at UniCredit Bank AG in London, wrote in a note to clients yesterday. “The ECB under Draghi does not like to mess around in the market, but if it sees a need, it will come with overwhelming force.”

Draghi’s Proposal

Draghi’s proposal involves Europe’s rescue fund buying government bonds on the primary market, buttressed by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, two central bank officials said July 27 on condition of anonymity. Further ECB rate cuts and long-term loans to banks are also up for discussion, one of the officials said.

While the ECB’s willingness to act is necessary to buy time, the central bank can’t solve the debt crisis alone, Moody’s Investors Service said today.

The euro fell 0.4 percent to $1.2253 at 3:50 p.m. in Frankfurt. The shared currency gained 1.4 percent in the two days after Draghi’s July 26 pledge to do whatever is necessary, ending last week at $1.2322. Spain’s bond market staged its biggest rally in seven months, sending the 10-year yield down to 6.74 percent from a euro-era record of 7.75 percent reached on July 25. The rally continued today, with Spain’s 10-year rate dropping to as low as 6.58 percent and Italy’s to 5.88 percent.